More Related Content Similar to Andy Brown (20) 2. Confidential Material – Chegg Inc. © 2005 - 2016. All Rights Reserved.2
Safe Harbor Statement
Forward-Looking Statements
This presentation contains forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements relate to expectations, beliefs, projections, future plans and strategies,
anticipated events or trends and similar expressions concerning matters that are not
historical facts. In some cases you can identify forward-looking statements by references to
future periods and use of terminology such “outlook,” “non-GAAP’, “as if,” “projected,” “new,”
“transition,” or similar words or phrases which are predictions of or indicate future events or
trends and which do not relate solely to historical matters. These forward-looking
statements include, without limitation those regarding Chegg’s positioning to capture market
opportunity, Chegg’s new all-digital business model and its ability to fuel sustainable high-
growth and profitability while better serving student needs and delivering enhanced value to
shareholders, Chegg’s anticipated revenue generation from Required Materials, Chegg’s
target operating model, , the non-GAAP presentations of Chegg’s results of operations, and
all statements about Chegg’s financial outlook. These statements are not guarantees of
future performance, but are based on management’s expectations as of the date of this
presentation and assumptions that are inherently subject to uncertainties, risks and changes
in circumstances that are difficult to predict. Forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause actual results, performance or
achievements to be materially different from any future results, performance or
achievements. Important factors that could cause actual results to differ materially from
those expressed or implied by these forward-looking statements include the following:
Chegg’s ability to attract new students, increase engagement and increase monetization; the
rate of adoption of Chegg’s offerings; the impact of Chegg’s acquisition of Imagine Easy
Solutions; Chegg’s ability to strategically take advantage of new opportunities to leverage the
Student Graph; competitive developments, including pricing pressures; Chegg’s anticipated
growth of Chegg Services; Chegg’s ability to build and expand its services offerings; Chegg’s
ability to develop new products and services on a
cost-effective basis and to integrate acquired businesses and assets; the impact of
seasonality on the business; Chegg’s partnership with Ingram and the parties’ ability to
achieve the anticipated benefits of the partnership, including the potential impact of the
economic risk-sharing arrangements between Chegg and Ingram on Chegg’s results of
operations; Chegg’s ability to effectively control operating costs; Chegg’s and Ingram’s ability
to manage their textbook library; changes in Chegg’s addressable market; changes in the
education market; and general economic, political and industry conditions. All information
provided in this presentation is as of the date hereof and Chegg undertakes no duty to
update this information except as required by law. These and other important risk factors are
described more fully in documents filed with the Securities and Exchange Commission,
including Chegg’s Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on November 7, 2016, and could cause actual results to vary from
expectations. Additional information will also be set forth in Chegg’s Annual Report on Form
10-K for the year ended December 31, 2016 to be filed with the Securities and Exchange
Commission.
Use of Non-GAAP Measures
In addition to financial results presented in accordance with generally accepted accounting
principles (GAAP), this presentation includes certain forward-looking non-GAAP financial
measures of financial performance, including adjusted EBITDA, non-GAAP operating
expenses, non-GAAP net revenues, non-GAAP gross margin, and adjusted EBITDA margin.
These non-GAAP financial measures are in addition to, and not a substitute for or superior
to, measures of financial performance prepared in accordance with GAAP, and may be
different from non-GAAP financial measures used by other companies. In addition, these
non-GAAP measures have limitations in that they do not reflect all of the amounts associated
with Chegg's results of operations as determined in accordance with GAAP. Reconciliations
of these non-GAAP financial measures to the most directly comparable financial measures,
are contained in the Appendix to this presentation.
5. A proprietary student platform
FY 2012
FY 2013
FY 2014
FY 2016 *Projected
FY 2015
300K
500K
700K
1,000K
1,500K
Learning Services:
Chegg Study
Chegg Tutors
Chegg Writing Tools
Chegg Test Prep
Outcome Services:
Brand Partnership
Careers
Enrollment
Required Materials:
Print Textbooks & eTextbooks
SUBSCRIBER GROWTHOUR CORE SERVICES
5
FY 2016
6. Transition to a Digital Business –
Essentials of the Ingram Agreement
• 5-year agreement started May 2015
• Ingram owns textbook purchases: $100M annual reduction in
textbooks spend
• Chegg receives ~20% commission on physical textbook transactions
• Chegg maintains the customer relationship
• Simplifies financial and operating model
• Completed at the end of 2016
6
8. Chegg is nearly universally known
OF STUDENTS HAVE HEARD
OF A CHEGG SERVICE1
OF THOSE WHO USE CHEGG,
PLAN TO RECOMMEND US1
1Hall and Partners Survey, Oct 2016, (College (n=1370))
8
3%
3%
6%
6%
6%
9%
21%
26%
KAPLAN TEST
PREP
WIKIPEDIA
BARNES & NOBLE
KHAN ACADEMY
QUIZLET
GOOGLE
CHEGG
AMAZON
PERCENT UNAIDED AWARENESS (COLLEGE)1
9. Students face more pressure than ever
296%
INCREASE IN IN-
STATE TUITION AT
PUBLIC COLLEGE
SINCE 19951
26
AVERAGE STUDENT
AGE2
40%
WORK AT LEAST 30
HOURS PER WEEK3
$35K
DEBT FOR THE AVERAGE
STUDENT WHEN THEY
GRADUATE4
1National Center for Education Statistics and US Census Bureau, 2015
2Hall and Partners 2016
3https://cew.georgetown.edu/wp-content/uploads/Working-Learners-Report.pdf
4http://blogs.wsj.com/economics/2015/05/08/congratulations-class-of-2015-youre-the-most-indebted-ever-for-now/
9
10. Education is a massive industry
OF THE US GDP3
%
ARE STUDENTS1
%
TRILLION2
$
1National Center for Education Statistics and US Census Bureau, 2015
2https://www.federalreserve.gov/releases/g19/Current/#fn11b
3www.data.worldbank.org/indication/NY.GD.MKTP.CD?location +US
10
11. A proprietary student platform
CHEGG STUDY MONTHY
RENEWAL RATE
1comScore U.S. Annual Unique Visitors (Custom Analytics), Oct 2015 - Sep 2016
2comScore U.S. Media Metrix Multi-Platform, Audience Duplication, Sep 2016
UVs (12 MONTHS)1
UVs (ONE MONTH)2 ISBNsEXPERT Q&As
11
SUBSCRIBERS
2016
12. Revenue Transition to a Services Platform
1FY’17 (E) represents management’s guidance provided on the 2/13/17 earnings call12
Millions
13. Interconnected platform drives profit growth
1Non-GAAP metric. See Appendix for reconciliation to GAAP.
2Represents FY17 business outlook for approximately $35M for Adjusted EBITDA issued on 2.13.17
ADJUSTED EBITDA ($M)1
$35
2012 2013 2014 2015 2016 20172
$5
$21
$(16)
$(4)
(13)$
13
14. High-growth, profitable, cash provider
CHEGG SERVICES REVENUE
GROSS MARGIN %
ADJUSTED EBITDA1
CAPEX (INCLUDES TEXTBOOKS)
FREE CASH FLOW
$25M ~$172M
32% >60%
$(16M) ~$35M
$120M ~$20-25M
$(31M) ~$15-20M
2012 2017
ESTIMATE2
1Non-GAAP metric. See Appendix for reconciliation to GAAP
2 Guidance issued on 2.13.17.
14
17. Confidential Material – Chegg Inc. © 2005 - 2017. All Rights Reserved.17
Reconciliation of GAAP to Non-GAAP Financial Measures
`
2016 2015 2016 2015
Total net revenues 63,057$ 68,154$ 254,090$ 301,373$
Adjustment as if transition to Ingram is complete (6,661) (27,143) (54,671) (135,270)
Non-GAAP total net revenues 56,396$ 41,011$ 199,419$ 166,103$
20%
Gross profit 42,485$ 41,774$ 134,489$ 111,524$
Share-based compensation expense 57 (56) 172 262
Transitional logistic charges — 174 — 6,033
Non-GAAP gross profit 42,542$ 41,892$ 134,661$ 117,819$
Gross margin % 67.4% 61.3% 52.9% 37.0%
Non-GAAP gross margin % 67.5% 61.5% 53.0% 39.1%
Operating expenses 43,559$ 37,712$ 174,559$ 169,224$
Share-based compensation expense (9,027) (7,047) (41,613) (38,513)
Amortization of intangible assets (1,389) (646) (4,605) (4,761)
Restructuring credits (charges) 125 (1,548) 423 (4,868)
Acquisition related compensation costs (1,500) (208) (4,988) (1,871)
Non-GAAP operating expenses 31,768$ 28,263$ 123,776$ 119,211$
Operating expenses as a percent of total net revenues 69.1% 55.3% 68.7% 56.2%
Non-GAAP operating expenses as a percent of total net revenues 50.4% 41.5% 48.7% 39.6%
(Loss) income from operations (1,074)$ 4,062$ (40,070)$ (57,700)$
Share-based compensation expense 9,084 6,991 41,785 38,775
Amortization of intangible assets 1,389 646 4,605 4,761
Restructuring (credits) charges (125) 1,548 (423) 4,868
Transitional logistic charges — 174 — 6,033
Acquisition related compensation costs 1,500 208 4,988 1,871
Non-GAAP income (loss) from operations 10,774$ 13,629$ 10,885$ (1,392)$
Net (loss) income (1,489)$ 3,630$ (42,245)$ (59,210)$
Share-based compensation expense 9,084 6,991 41,785 38,775
Amortization of intangible assets 1,389 646 4,605 4,761
Restructuring (credits) charges (125) 1,548 (423) 4,868
Transitional logistic charges — 174 — 6,033
Acquisition related compensation costs 1,500 208 4,988 1,871
Non-GAAP net income (loss) 10,359$ 13,197$ 8,710$ (2,902)$
Weighted average shares used to compute net (loss) income per share 91,526 87,993 90,534 86,818
Effect of dilutive options, restricted stock units and warrants 8,887 5,232 6,476 —
Non-GAAP weighted average shares used to compute non-GAAP net income (loss) per share 100,413 93,225 97,010 86,818
Net (loss) income per share (0.02)$ 0.04$ (0.47)$ (0.68)$
Adjustments 0.12 0.10 0.56$ 0.65$
Non-GAAP net income (loss) per share 0.10$ 0.14$ 0.09$ (0.03)$
Year Ended December 31,
CHEGG, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands, except percentages)
(unaudited)
Three Months Ended December 31,
18. Confidential Material – Chegg Inc. © 2005 - 2017. All Rights Reserved.18
Reconciliation of GAAP Net Loss to EBITDA and Adjusted EBITDA
CHEGG, INC.
RECONCILIATION OF GAAP NET LOSS TO EBITDA AND ADJUSTED EBITDA
(in thousands, except percentages)
(unaudited)
2011 2012 2013 2014 2015 2016
Adjusted EBITDA
GAAP Net loss: $ (37,602) $ (49,043) $ (55,850) $ (64,758) $ (59,210) $ (42,245)
Interest expense, net 3,764 4,393 3,818 317 247 171
Provision for (benefit from) income taxes (200) 29 642 186 1,479 1,707
Textbook library depreciation expense 56,142 57,177 64,759 70,147 43,553 9,267
Other depreciation and amortization 5,832 10,796 10,078 11,159 11,511 14,520
EBITDA 27,937 23,352 23,447 17,051 (2,420) (16,580)
Textbook library depreciation expense (56,142) (57,177) (64,759) (70,147) (43,553) (9,267)
Share-based compensation expense 13,132 18,045 36,958 36,888 38,775 41,785
Other income, net (2,061) (634) 359 (879) (216) 297
Restructuring charges - - - - 4,868 (423)
Transitional logistic charges - - - - 6,033 -
Acquisition related compensation costs - - - 2,583 1,871 4,988
Impairment of intangible assets - 611 - 1,552 - -
Adjusted EBITDA $ (17,135) $ (15,803) $ (3,995) $ (12,952) $ 5,358 $ 20,800
Adjusted EBITDA margin % (10)% (7)% (2)% (4)% 2% 10%
2011-2014 Average Adjusted EBITDA
margin % (6)%
19. Confidential Material – Chegg Inc. © 2005 - 2017. All Rights Reserved.19
Reconciliation of Forward Looking Net Loss to EBITDA and Adjusted EBITDA
Three Months
Ended March 31,
2017
Year Ended
December 31,
2017
*
Net loss (10,300)$ (29,900)$
Interest expense, net — 100
Provision for income taxes 800 3,300
Other depreciation and amortization expense 4,200 18,800
EBITDA (5,300) (7,700)
Share-based compensation expense 8,600 35,000
Other expense, net 200 600
Restructuring charges 1,000 1,100
Acquisition-related compensation costs 1,500 6,000
Adjusted EBITDA 6,000$ 35,000$
* Adjusted EBITDA guidance for the three months ended March 31, 2017 represents the midpoint of the range of $5 million to $7 million.
CHEGG, INC.
RECONCILIATION OF FORWARD LOOKING NET LOSS TO EBITDA AND ADJUSTED EBITDA
(in thousands)
(unaudited)
